THE
WOODLANDS, Texas, June 27,
2024 /PRNewswire/ -- Target Hospitality Corp.
("Target Hospitality", "Target" or the "Company") (NASDAQ: TH), one
of North America's largest
providers of vertically integrated modular accommodations and
value-added hospitality services, today provided the following
revised 2024 outlook and business update.
As previously announced, on June 10,
2024, the Company received notice that the U.S. government
intends to terminate the South Texas Family Residential Center
contract ("STFRC Contract"), effective in 60 days, or on or about
August 9, 2024 ("Effective
Date"). The STFRC Contract was based on a fixed minimum lease
revenue commitment and for the year ended December 31, 2023, contributed approximately
$55.9 million in total consolidated
revenue.
Regarding Target's Pecos Children's Center ("PCC") community,
since 2021, the PCC community has served as a cornerstone to the
U.S. government's domestic humanitarian aid mission and the Company
anticipates a normal course renewal of this contract in November of
2024. However, given the dynamic fluctuations in community
population, Target believes it prudent to exclude from the revised
2024 outlook any incremental PCC variable revenue.
Target's robust operating platform, network flexibility and
commitment to maximize operational efficiencies has established an
enhanced financial position. These attributes support a
highly durable and flexible operating model centered on an
optimized balance sheet and robust liquidity profile.
As of May 31, 2024, the Company
had approximately $147 million of
cash and cash equivalents with approximately $322 million of total available liquidity, no
outstanding borrowings on the Company's $175
million credit facility and a net leverage ratio of 0.1
times. Target anticipates achieving zero net debt by year end
2024, with over $350 million of total
available liquidity.
Target's contract portfolio provides a high degree of revenue
visibility, coupled with an efficient operating structure, these
elements support strong cash generation and an optimized balance
sheet. After giving effect to the recent STFRC Contract
termination, PCC variable revenue contribution and continued
positive operational momentum, the Company is providing a revised
2024 outlook, of:
- Total revenue between $375 and
$385 million
- Adjusted EBITDA(1) between $184 and $190
million
- Total capital spending between $25 and $30
million, excluding acquisitions
- Anticipates zero net debt by year end 2024
- Year end 2024 total available liquidity exceeding $350 million
TDR Proposal Update
On March 25, 2024 Target announced
that the Board of Directors of Target Hospitality ("the Board")
received an unsolicited non-binding proposal from Arrow Holdings
S.àr.l. ("Arrow"), an affiliate of TDR Capital LLP ("TDR"), to
acquire all of the outstanding shares of common stock of Target
Hospitality that are not owned by any of Arrow, any investment fund
managed by TDR or any of their respective affiliates, for cash
consideration of $10.80 per share
(the "Proposal").
The Board has established a special committee of independent
directors (the "Special Committee"), and the Special Committee has
retained Centerview Partners LLC and Ardea Partners LP as its
financial advisors and Cravath, Swaine & Moore LLP as its legal
advisor. The Special Committee is in the process of reviewing
and evaluating the Proposal.
The Special Committee has made no decision at this time with
respect to the Proposal, and the Company does not undertake any
obligation to provide any updates with respect to the Proposal or
any other transaction, except as required by applicable law or
other regulatory requirements. There can be no assurance that
any transaction will result from the Special Committee's evaluation
of the Proposal, or, if so, the timing, terms and conditions of
such transaction.
About Target Hospitality
Target Hospitality is one of North
America's largest providers of vertically integrated modular
accommodations and value-added hospitality services in the United States. Target builds, owns and
operates a customized and growing network of communities for a
range of end users through a full suite of value-added solutions
including premium food service management, concierge, laundry,
logistics, security and recreational facilities services.
Cautionary Statement Regarding Forward Looking
Statements
Certain statements made in this press release (including the
financial outlook contained herein) are "forward looking
statements" within the meaning of the "safe harbor" provisions of
the United States Private Securities Litigation Reform Act of 1995.
When used in this press release, the words "estimates,"
"projected," "expects," "anticipates," "forecasts," "plans,"
"intends," "believes," "seeks," "may," "will," "should," "future,"
"propose" and variations of these words or similar expressions (or
the negative versions of such words or expressions) are intended to
identify forward-looking statements. These forward-looking
statements are not guarantees of future performance, conditions or
results, and involve a number of known and unknown risks,
uncertainties, assumptions and other important factors, many of
which are outside our control, that could cause actual results or
outcomes to differ materially from those discussed in the
forward-looking statements. Important factors, among others, that
may affect actual results or outcomes include: operational,
economic, including inflation, political and regulatory risks; our
ability to effectively compete in the specialty rental
accommodations and hospitality services industry, including growing
the HFS – South and Government segments; effective management of
our communities; natural disasters and other business distributions
including outbreaks of epidemic or pandemic disease; the duration
of any future public health crisis, related economic repercussions
and the resulting negative impact to global economic demand; the
effect of changes in state building codes on marketing our
buildings; changes in demand within a number of key industry
end-markets and geographic regions; changes in end-market demand
requirements including variable occupancy levels associated with
subcontracts in the Government segment; our reliance on third party
manufacturers and suppliers; failure to retain key personnel;
increases in raw material and labor costs; the effect of impairment
charges on our operating results; our future operating results
fluctuating, failing to match performance or to meet expectations;
our exposure to various possible claims and the potential
inadequacy of our insurance; unanticipated changes in our tax
obligations; our obligations under various laws and regulations;
the effect of litigation, judgments, orders, regulatory or customer
bankruptcy proceedings on our business; our ability to successfully
acquire and integrate new operations; global or local economic and
political movements, including any changes in policy under the
Biden administration or any future administration; federal
government budgeting and appropriations; our ability to effectively
manage our credit risk and collect on our accounts receivable; our
ability to fulfill Target Hospitality's public company obligations;
any failure of our management information systems; our
ability to refinance debt on favorable terms and meet our debt
service requirements and obligations; and risks related to our
outstanding obligations in connection with the Senior Notes.
We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law.
(1) Non-GAAP Financial Measures
This press release contains a forward-looking non-GAAP financial
measure Adjusted EBITDA. Reconciliations of this forward-looking
measure to its most directly comparable GAAP financial measure are
unavailable to Target Hospitality without unreasonable effort. We
cannot provide reconciliations of forward-looking Adjusted EBITDA
to a GAAP financial measure because certain items required for such
reconciliations are outside of our control and/or cannot be
reasonably predicted, such as the provision for income taxes.
Preparation of such reconciliations would require a forward-looking
balance sheet, statement of income and statement of cash flow,
prepared in accordance with GAAP, and such forward-looking
financial statements are unavailable to us without unreasonable
effort. Although we provide a range of Adjusted EBITDA that we
believe will be achieved, we cannot accurately predict all the
components of the Adjusted EBITDA calculations. Target Hospitality
provides an Adjusted EBITDA outlook because we believe that these
measures, when viewed with our results under GAAP, provide useful
information for the reasons noted below.
Definitions:
Target Hospitality defines EBITDA as net income (loss) before
interest expense and loss on extinguishment of debt, income tax
expense (benefit), depreciation of specialty rental assets, and
other depreciation and amortization. Adjusted EBITDA reflects the
following further adjustments to EBITDA to exclude certain non-cash
items and the effect of what management considers transactions or
events not related to its core business operations:
- Other (income) expense, net: Other (income) expense, net
includes miscellaneous cash receipts, gains and losses on disposals
of property, plant, and equipment, and other immaterial expenses
and non-cash items.
- Transaction expenses: Target Hospitality incurred certain
transaction costs during the first quarter of 2023 and 2024
associated with certain transactions, including the Proposal.
- Stock-based compensation: Charges associated with stock-based
compensation expense, which has been, and will continue to be for
the foreseeable future, a significant recurring expense in our
business and an important part of our compensation strategy.
- Change in fair value of warrant liabilities: Non-cash change in
estimated fair value of warrant liabilities.
- Other adjustments: System implementation costs, including
non-cash amortization of capitalized system implementation costs,
business development, accounting standard implementation costs and
certain severance costs.
Utility and Purposes:
EBITDA reflects net income (loss) excluding the impact of
interest expense and loss on extinguishment of debt, provision for
income taxes, depreciation, and amortization. We believe that
EBITDA is a meaningful indicator of operating performance because
we use it to measure our ability to service debt, fund capital
expenditures, and expand our business. We also use EBITDA, as do
analysts, lenders, investors, and others, to evaluate companies
because it excludes certain items that can vary widely across
different industries or among companies within the same industry.
For example, interest expense can be dependent on a company's
capital structure, debt levels, and credit ratings. Accordingly,
the impact of interest expense on earnings can vary significantly
among companies. The tax positions of companies can also vary
because of their differing abilities to take advantage of tax
benefits and because of the tax policies of the jurisdictions in
which they operate. As a result, effective tax rates and provision
for income taxes can vary considerably among companies. EBITDA also
excludes depreciation and amortization expense because companies
utilize productive assets of different ages and use different
methods of both acquiring and depreciating productive assets. These
differences can result in considerable variability in the relative
costs of productive assets and the depreciation and amortization
expense among companies.
Target Hospitality also believes that Adjusted EBITDA is a
meaningful indicator of operating performance. Our Adjusted EBITDA
reflects adjustments to exclude the effects of additional items,
including certain items, that are not reflective of the ongoing
operating results of Target Hospitality. In addition, to
derive Adjusted EBITDA, we exclude gains or losses on the sale and
disposal of depreciable assets and impairment losses because
including them in EBITDA is inconsistent with reporting the ongoing
performance of our remaining assets. Additionally, the gain or loss
on sale and disposal of depreciable assets and impairment losses
represents either accelerated depreciation or excess depreciation
in previous periods, and depreciation is excluded from EBITDA.
Adjusted EBITDA is not a measurement of Target Hospitality's
financial performance under GAAP and should not be considered as
alternatives to Net income (loss), or other performance measures
derived in accordance with GAAP. In addition, this non-GAAP measure
may not be comparable to similarly titled measures of other
companies. Target Hospitality's management believe that Adjusted
EBITDA provides useful information to investors about Target
Hospitality and its financial condition and results of operations
for the following reasons: (i) it is among the measures used by
Target Hospitality's management team to evaluate its operating
performance; (ii) it is among the measures used by Target
Hospitality's management team to make day-to-day operating
decisions, (iii) it is frequently used by securities analysts,
investors and other interested parties as a common performance
measure to compare results across companies in Target Hospitality's
industry.
Investor Contact
Mark
Schuck
(832) 702 –
8009
ir@targethospitality.com
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SOURCE Target Hospitality
